Prime Minister: No More Mortgage Loans in Foreign Currencies

Croatian Prime Minister Zoran Milanović says that he will press for a law change that will make mortgage loans in foreign currencies not possible…

Speaking on Thursday at a government sitting, Milanović said that Croatia needed to make changes to the law following the Swiss franc debacle.

“In the future we will go towards all mortgage loans – which we can regulate with special laws – being in the Croatian kuna currency. We have put it on the agenda and we need to start working on making the decision. Some will say that it is a populist move, but I say that it is necessary and inevitable,” said the PM, adding that Croatia is one of only two or three countries in the world where the syndrome of people faced with growing mortgage repayment rates, whilst the value of the property which they purchased falls, exists.

Milanović said that the banks will not be affected, “but will have to bear the burden of social responsibility”.

“One day we will be part of the eurozone. I can say, whilst I am Prime Minister, that we will not rush into it. We will take our time to see what is good, and what is not. We have had the Croatian kuna for 20 years and we are acting like it is not our currency,” he said.

On Friday parliament is expected to pass a law which will see the rate of the Swiss franc frozen for one year at 6.39 kuna.

Around 8% (60,000) Croatian Swiss franc mortgage loan owners were hit hard when Switzerland removed the cap on its Swiss Franc to the euro which saw the currency rise 17% against the Croatian kuna in 24 hours last week.

Swiss franc loans were for a long time the best credit deal around and a large number of Croatians, Poles and Hungarians in particular took advantage of it in the early 2000s when the franc was weak and interest rates were lower than those for loans in local currencies.